Commercial Mortgage Market Monitor June 2018

Monthly Commentary

The CMBS 2.0 delinquency rate declined slightly in June to 0.42% while the special servicing rate declined from 0.98% to 0.94%.

There were 23 loans ($354mm) that became newly delinquent in June. Two of the largest loans were $37.9MM Harbourside North (3.4%
COMM 2013-CR12, CMBX.7) and $26MM McKinley Mall (2% COMM 2014-CR14, 1% COMM 2014-LC15). Harbourside North is secured by a
121,983 square foot urban office building located in Washington, D.C. As of year-end 2017, the asset was 86% occupied, reported net
operating income (NOI) of $3.6MM, and a net operating income (NOI) DSCR of 1.33x. The servicer is awaiting May, June, and July’s
payments from the borrower. The McKinley Mall loan is secured by a 728,133 square foot regional mall located in Buffalo, NY. As of year-end
2017, the asset was 96% occupied, reported net operating income (NOI) of $3.7MM, and a net operating income (NOI) DSCR of 1.5x. The
mall’s top three tenants are Sears, JC Penny, and Bon-Ton. Bon-Ton will be departing and the May loan payment remains due.

Of the five loan liquidations that exhibited material losses, the highest loss severity came from the liquidation of $13.3MM Pathmark – Linden
(MSBAM 2015-C22), a 58,817 square foot former grocery store (A&P/Pathmark) located in Linden, NJ (1994 build). As of April 2015
origination, the property was fully occupied. The single tenant filed for bankruptcy in July 2015 and vacated the property. The borrower
stopped making payments upon the tenant vacancy – which resulted in delinquency and foreclosure. The property became real estate owned
(REO) in May 2017 and was liquidated which resulted in an 86.6% loss severity to the trust.

In new issue CMBS, seventeen private label deals priced during the month ($11.4BN) which included five conduit deals ($4.3BN) and twelve
single asset/single borrower (SASB) deals ($7.1BN). Of the five conduit transactions, four utilized a horizontal risk retention structure and
one utilized an L-shaped risk retention structure. The LCF AAAs priced at a weighted average spread of swaps +91bps. The largest SASB
transaction was a $1.035BN 2yr floater with five 1yr extension options. The loan proceeds were used to repay existing financing encumbering
a portfolio that consists of 314 select service hotels throughout the country. The deal utilized a horizontal risk retention structure; the AAA
class priced at L+100bps.

Year-to-date private label issuance totals $39.9BN across 62 deals, 21% higher than year-to-date 2017. This is the highest monthly issuance
since we saw $11.03BN of origination across 15 deals in November 2016. Despite this month’s uptick, annualized issuance volume of $66BN
is still approximately 20% lower than full year 2017